Home owners win mortgage refund
HUNDREDS of thousands of home owners could be in line to collect hefty refunds for unfair mortgage charges.
Lenders face being forced to hand back millions of pounds in fees imposed on customers who missed their monthly loan payments.
One firm has been fined £2.8million and made to return £7.7million to borrowers when it was found to have acted unfairly.
The crackdown by watchdog the Financial Services Authority is likely to lead to claims by hundreds of thousands of home owners who believe they have been harshly penalised.
Terry Balfour, of insolvency specialist IVA.com, said: “It’s good to see the financial watchdog stepping in on the side of the thousands of borrowers in arrears with their mortgage.
“Banks and other mortgage lenders all too often impose punitive charges when their customers get into trouble with repayments.
“It is understandable that a modest fee for additional administration may be imposed, but piling substantial penalties on to households which are clearly struggling is unnecessary and will only serve to further line the bulging coffers of many lenders.
“When people are in trouble with their mortgage they need help and advice and a bit of a breathing space – not to be hounded for even more money which they cannot repay.”
The FSA fined lender Gmac-RFC for how it treated customers between October 2004 and November 2008.
The fine was partly due to the £45 a month levied on borrowers who went into arrears.
The watchdog said this was “excessive” and did not reflect administration costs.
However as many as 30 lenders – including Bradford & Bingley, the Derbyshire and Cheshire Building Societies and specialist lenders like Kensington and Morgan Stanley – have a similar charging structure.
According to the Council of Mortgage Lenders 195,000 borrowers are currently in arrears and this figure is expected to rise to 205,000 this year.
High street banks, particularly those in receipt of government bailout funds, have been forced to adopt a more tolerant approach to struggling borrowers. But many non-mainstream lenders like Gmac-RFC outsource the administration of their loan books to companies that are not so sympathetic.
Outsourcing firm Homeloan Management (HML), part of the Skipton group, processes loans for more than 400,000 other borrowers, including customers of the Derbyshire and Cheshire Building Societies.
Although HML refuses to publish statistics on arrears, a similar pool of 400,000 loans from Gmac-RFC shows that 20 per cent of borrowers are behind with payments.
This suggests that as many as 80,000 customers with loans processed by HML are being charged a monthly fee that the FSA deems unfair.
An industry insider said: “It’s a question of when, not if, this will apply to other lenders.
“It is causing a mighty problem as lenders and HML do not have the staff to look at individuals on a case-by-case basis.”
The FSA is set to release a report later this week and five more mortgage lenders are in line for fines.
Cerris Tavinor, an FSA spokeswoman, said: “We completed our investigation into Gmac and published the results of that case.
“We have made the point publicly that we have referred other lenders to enforcement, so other work is carrying on.”
Neil Warman, the chief commercial and finance officer at HML, said: “We are not able to comment on specific client circumstances but we work closely with a number of lenders, managing their customer mortgage accounts in line with their lending and administration policies.
“In the event of one of our clients wanting to make a retrospective adjustment to the mortgage accounts we manage for them, then we would work with them to help this to take place effectively.”
